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Drax reported first half earnings of £120m
Biomass will have an important role to play
in the UK's future energy mix thanks to its ability to balance supply
from more unreliable technologies such as wind and solar.
That’s according to biomass generator Drax, which today (28 July), published its half-year report, detailing earnings before interest, taxes, depreciation and amortization (EBITDA) of £120m – a year-on-year increase of 18%.
Writing in the chief executive’s overview, Drax CEO Dorothy Thompson
said the strong performance should continue thanks to the ability of
biomass to balance power supply and demand.
Thompson wrote: “Aggregate wind farm and solar output in the UK can
be expected to fall below 1% of total electricity production with
“However, an electricity supply that includes highly
variable energy sources can still be reliable overall, so long as there
is enough flexible plant in the generation mix to respond quickly to
changes in the supply/demand balance.
“If that plant can do so in a low carbon manner then it is all the
more advantageous. It is for this reason that we believe electricity
generated from sustainable biomass should play a central and long-term
role in the future energy mix of the UK and why we remain convinced of
the long-term value inherent within the Group.”
Thompson added that the market for balancing the UKs power demand should be worth £2bn in five years time.
The positive outlook is a marked contrast from just three weeks ago,
when the Chancellor announced that renewables such as biomass would no
longer be exempt from the Climate Change Levy.
The move, which is expected to cost Drax £90m over the next two
years, also caused the company’s share prices to drop 28% immediately
after the announcement.
In her overview, Thompson said the decision was a “shock to the
industry, representing an about-turn in a well-entrenched policy that
has been a key underpinning for renewable investments since 2001”.
However, she said Drax has reorganised, and expects to complete the conversion of a third power unit to biomass by the end of 2017.
The half-year report also readdressed concerns that biomass was still a net contributor to climate change.
The report claimed: “The weight of academic evidence from around the
world states that sustainable biomass is significantly lower in carbon
emissions than coal. All Drax biomass is sustainable and procured
against a robust industry leading policy which is independently audited